We all know that the hottest real estate markets for decades have been the coastal cities. Places like San Francisco, Los Angeles, Seattle, NYC, Miami, and others. Today, for the most part, only the elite can still afford these places. It’s another sign of how the middle class is repeatedly priced out of the most preferred neighborhoods. Today, you should be noticing an inland flow of both people and major businesses.
Recently, a group of Silicon Valley capital investors toured several cities in the heartland and saw amenities, affordability, and opportunities that have gone unnoticed. Many metropolises in the heartland have been encouraging and working towards gentrification for years. Places in Ohio like Youngstown and Akron. South Bend, Indiana and even places like Flint and Detroit Michigan. That’s a very short list. There are many other metro areas in the heartland that have brought about a renovation meeting middle-class tastes.
What these investors and others are finding is affordability in neighborhoods of coffee shops, boutique shops, and dirty diners replaced with table clothed farm-to-table restaurants. Detroit even bulldozed some neighborhoods all the way down and restarted over from the ground up. What they are not finding are neighborhoods of homes that require a million dollar salary to feel middle class. Something else you find is room to expand. Not a population density so thick it has people living in alleyways.
Not every rustbelt city is prepared for major growth. Nor is every neighborhood middleclass in the cities have already made changes. Investors looking to join the wave flowing to the heartland still need to perform a thorough due diligence. Even if you don’t catch the first wave, a second wave will almost certainly come along to renovate more neighborhoods as technology and industrial businesses migrate inward.
Not everyone is fleeing San Francisco just yet. However, according to Redfin, in the last quarter of 2017, more people moved out of the San Francisco area than any other metro area in the country. And housing prices stagnated there more than a year ago. Now big business is beginning to realize the cost of living in the heartland allows software engineers to be paid $75,000 rather than $250,000 – for a better quality of life.
Keep an eye on Amazon. It appears to be a foregone conclusion that their search for a second headquarters will result in an inland destination. They’ve made it clear it won’t be in Seattle. Additionally, a venture capital fund invested in by Jeff Bezos is looking to invest in startups in the heartland.
There is an entirely different attitude from the inland people towards major growth and expansion. They welcome and celebrate it rather than fight against it pricing real estate out of the reach of the middle and working classes. That translates into easier permitting, less taxes, and an overall environment more favorable to renewal and growth.
It will take time for this sea change to become highly profitable for real estate investors. Some will make the most money as part of the first wave while others will settle for more security that comes with the less profitable second and follow on waves of investment.
What suggestions do you have for investors in today’s market? Please leave comments.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for ten years. He also draws upon 37 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.
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